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Denise Tsang

The Federation of Hong Kong Industries has called on Beijing to make trade in goods a priority when it maps out a free-trade arrangement between Hong Kong and China.

The federation was responding to Beijing's announcement on Wednesday that the Ministry of Foreign Trade and Economic Co-operation would set up a working group to study the proposed free-trade area.

Welcoming the move, federation chairman Victor Lo Chung-wing said working out a free-trade agreement for goods was far easier than for services.

Goods generally were more straightforward to deal with because there were well-established country-of-origin rules.

He cited the Association of Southeast Asian Nations (Asean) free-trade agreement as a prime example.

Asean started with goods years ago, while negotiations on services such as legal and accounting continue.

'We have always supported free trade with China as early as the handover of sovereignty in 1997,' Mr Lo said.

'We also wrote to the Government to press ahead with the idea in 1999. If it comes true, it will be very beneficial to Hong Kong's economic development in the next five to 10 years.'

He said free trade was crucial to Hong Kong's economic growth as the city's economy was moving from an industrial base to a service base.

Free trade would attract valued-added industries such as software, integrated circuitry and pharmaceuticals to Hong Kong.

'When the companies of such industries come to Hong Kong, they will also bring in technology knowhow and professionals,' Mr Lo said.

He said Hong Kong's future would hinge on technology development because an abundant supply of goods worldwide would squeeze companies' profitability.

'Hong Kong has an established financial centre and manufacturing experience, which will be very helpful in developing a technology centre,' Mr Lo said.

He did not believe the bursting of the dotcom bubble would scupper the long-term development of technology-based industries in Hong Kong.

On the back of the mainland's strong economic growth, Hong Kong companies should prepare for competition with mainland enterprises.

'Many mainland enterprises have been catching up very fast in the past few years. Before long, they will become major competitors to Hong Kong companies,' Mr Lo said, adding competition was also expected to soar.

'As the process of economic globalisation accelerates, Hong Kong enterprises should be prepared to face ever-increasing competition not only with their local counterparts, but also companies from all parts of the world.'

Reviewing the economy this year, Mr Lo said the September 11 attacks on the United States had slowed Hong Kong's recovery.

'Hong Kong's business environment will remain difficult throughout the first half of next year; we are hoping for improvement in the second half,' he said.



Swift agreement can only benefit SAR's economic development in move to service base